Is Soleno Therapeutics (SLNO) a Buy Despite Elevated Valuation Following FDA Approval and JCEM Publication?

The recent FDA approval of VYKAT XR for hyperphagia in Prader-Willi syndrome (PWS) and the publication of pivotal trial results in the Journal of Clinical Endocrinology and Metabolism (JCEM) have positioned Soleno Therapeutics (SLNO) at a crossroads. While the company's clinical validation appears robust, its elevated valuation metrics and mixed investor sentiment raise critical questions for potential investors. This analysis weighs the evidence to determine whether SLNO merits a "buy" designation despite these challenges.

Robust Clinical Validation: A Foundation for Long-Term Growth

Soleno's FDA approval of VYKAT XR in March 2025 marked a historic milestone as the first and only treatment for hyperphagia in PWS patients aged 4 and older. The approval was underpinned by a rigorous Phase 3 clinical program, including a 16-week randomized withdrawal study (C602-RWP) involving 77 participants who had previously completed earlier trials. In this study, participants randomized to placebo experienced a statistically significant worsening of hyperphagia compared to those continuing on VYKAT XR, with a p-value of 0.0022. Placebo recipients also showed greater weight gain and increases in BMI z-scores, underscoring the drug's efficacy in addressing both behavioral and metabolic outcomes according to trial data.

Long-term data from the C602-OLE open-label study further reinforced VYKAT XR's value, demonstrating a 6.3-point reduction in Hyperphagia Questionnaire for Clinical Trials (HQ-CT) scores after one year. These results, combined with the absence of serious adverse events in the VYKAT XR group, suggest a durable safety profile and sustained therapeutic benefit. The publication of these findings in JCEM-a-peer-reviewed-journal--adds credibility to Soleno's claims and signals broader acceptance within the medical community.

Market Skepticism: Elevated Valuation and Mixed Signals

Despite these clinical triumphs, Soleno's stock trades at a Price-to-Sales ratio of 25.7x, significantly above industry peers. This premium reflects both optimism about VYKAT XR's commercial potential and concerns about the company's ability to sustain growth. For context, the third-quarter 2025 financial report showed product revenue of $66.0 million and net income of $26.0 million, but these figures must be contextualized against the company's $556.1 million in cash and securities as of September 2025. While strong liquidity is a positive, the recent 8.18% decline in 30-day share price suggests market caution.

A discounted cash flow analysis estimates Soleno's fair value at $465.58, implying the stock is undervalued. However, this assessment hinges on assumptions about future cash flow growth, which may be uncertain given the niche nature of PWS and the high cost of patient acquisition. Analysts remain divided: fifteen firms have issued a "Buy" or "Strong Buy" rating, including a $125 price target from Goldman Sachs, while Weiss Ratings reiterated a "Sell (D-)" rating. The disparity highlights the tension between clinical promise and commercial execution risks.

Balancing the Equation: Is SLNO a Buy?

The decision to invest in Soleno hinges on reconciling two key factors: the strength of its clinical data and the skepticism embedded in its valuation. On one hand, VYKAT XR's FDA approval and JCEM publication provide a solid foundation for market differentiation. The drug's ability to address hyperphagia-a core unmet need in PWS-positions Soleno to capture a significant share of a growing market. On the other hand, the high P/S ratio and mixed analyst ratings reflect concerns about scalability and competition.

For investors with a long-term horizon, the robust clinical validation and strong cash reserves may justify the elevated valuation. The company's ability to maintain its leadership in PWS treatment could drive revenue growth beyond current projections. However, those prioritizing near-term returns may find the valuation risks too pronounced, particularly given the recent share price volatility.

Conclusion

Soleno Therapeutics stands at an inflection point. The clinical validation of VYKAT XR is undeniably strong, supported by rigorous trials and peer-reviewed evidence. Yet, the market's skepticism-reflected in valuation metrics and analyst ratings-cannot be ignored. For investors who believe in the long-term potential of addressing rare diseases with unmet needs, SLNO could represent a compelling opportunity. However, prudence is warranted, as the path to sustained profitability will require navigating commercial challenges and managing expectations.